U.K.'s Digital Economy Bill Causes Debate Over Retransmission Fees

The bill will also "protect children from online pornography by requiring age verification" and bring sentences for people who violate copyright laws online into line with physical infringement.

The U.K. government on Tuesday unveiled its Digital Economy Bill, which includes a section that ITV said could pave the way for U.S.-style retransmission consent fees, and which wants to make the U.K. “the most digital nation in the world.”

The new bill also includes measures designed to strengthen protections for citizens. Among others, it will "protect children from online pornography by requiring age verification for access to all pornographic sites and applications" and "increase the sentencing options for people who infringe [on] copyright laws online, bringing sentences into line with the current penalties available for 'physical infringement'."

Section 73 of Britain’s current Copyright Designs and Patents Act of 1988 means that cable TV operators (a definition that excludes Sky) can retransmit public service broadcast channels without any payment, but the proposed bill would repeal that, a move that TV giant ITV, led by CEO Adam Crozier, has long advocated.

"We have consistently called for major pay-TV platforms to pay U.K. public service broadcasters (PSBs) fairly for the 'transmission' of their channels ending what is effectively a multi-million pound subsidy — and this is clearly a welcome first step in that direction,” an ITV spokesman said. “This is simply about ITV, and other PSBs, being paid fairly for their investment in original U.K. content so that we can continue to invest in the programs viewers love."

U.K. cable giant Virgin Media though highlighted that the government has also made it clear to industry players that it wants to ensure that there are "zero net fees," meaning that no retransmission fees are expected to be introduced given that the spectrum allocation, programming guide prominence and advertising revenue that PSBs receive amount to a big value. Brigitte Trafford, Virgin Media chief corporate affairs officer, also claimed victory: “Virgin Media welcomes the government’s decision to reject a two-year lobbying campaign by ITV and Channel 4 to charge viewers extra fees for watching programmes on cable and satellite that they’ve already paid for." She added that if this situation appears to be at risk, the government could consider whether further legislative change is required.

Sky, in which Rupert Murdoch's 21st Century Fox owns a 39 percent stake, and other pay TV firms have said that the U.S. and U.K. markets are different and that regulation in Britain would need to change for retrans payments. They have said proponents of retrans fees want to enjoy the benefits of their PSB status and also make pay TV firms and their subscribers pay to receive free-to-view PSB channels.

"At first sight, it looks like the pay TV operators have won the retransmission battle in that the government has seemingly blocked the main PSB channels from charging for their main channel," said Liberum Capital analyst Ian Whittaker. "However, ITV has now said it will push ahead with commercial negotiations with the pay TV operators for payment of ITV1 so, to ITV, the debate is seemingly not off the table."

The Digital Economy Bill will now begin its progress through the U.K. parliament. It will have its first debate at the second reading stage and is expected to complete its passage through the House of Commons and move to the House of Lords in the fall. Royal assent, which is needed to make the bill into law, is expected in the spring of 2017.

“We want the U.K. to be a place where technology ceaselessly transforms the economy, society and government,” said U.K. digital economy minister Ed Vaizey. “The U.K. has always been at the forefront of technological change, and the measures in the Digital Economy Bill provide the necessary framework to make sure we remain world leaders.”